Livestock Industry Impacts State's Economy

URBANA - A 30-year decline in the Illinois livestock industry has stabilized and some sectors, in fact, are growing, concludes a recent University of Illinois report.
calendar icon 12 July 2007
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"There is $1.939 billion in direct output from livestock products to the Illinois economy each year and a total economic impact of $3.173 billion," said Peter Goldsmith, an associate professor of agribusiness and the Soybean Industry Endowed Chair in Agricultural Strategy in the Department of Agricultural and Consumer Economics.

"And these products contribute $256.78 million in taxes. The state's 326 meat and dairy processing firms add another $10.069 billion in direct output products and $19.715 billion in total economic impact. Together, the livestock products and meat and dairy processing sectors provide the equivalent of 119,538 full-time jobs."

Goldsmith co-authored the report, "The Economic Impact of Illinois's Livestock Industry," (PDF) with Durga Saripally, a research assistant in the Department of Urban and Regional Planning. The research was jointly funded by the Illinois Pork Producers Association and the Illinois Livestock Development Group.

"This report serves as a touchstone for industry, stakeholders, and policymakers to better understand the economic role of livestock production and meat and dairy processing in Illinois," Goldsmith explained.

"This industry is a significant provider of output, jobs, taxes, exports from the state, and markets for the state's grain producers."

During the past 30 years, when compared to the rest of the state's economy, the livestock sector has been in a steady decline. However, beginning in 1999 through 2004 (the latest year for which data is available) the decline stabilized and has even shown growth in certain instances.

"Though the industry may not have grown as fast as other sectors, livestock production and meat and dairy processing still play an important role in the state's economy and can be particularly important in certain regions," he noted.

For example, Clinton County, in southwestern Illinois, is the leading livestock county but Greene County, also in the southwest, is the most dependent county as the livestock sector equals 15.3 percent of the county's personal income.

Illinois's ranking among the livestock-producing states has generally slipped since 1995.

"But the state's swine herd is still the fourth largest in the country. There has actually been a 4 percent increase in hog numbers in the state since 1999," said Goldsmith.

"The dairy and beef herds are about the 25th largest and it will be interesting to see if the wide availability of dried distillers grains and solubles from the ethanol industry will return those species back to Illinois."

In terms of economic impact, while hog operations account for 23 percent of the commercial livestock business in the state, they contribute 55 percent of livestock's total cash receipts.

"The hog sector is the leading livestock species group with over $1.7 billion of total economic impact," said Goldsmith. "Beef is about half of that at $800 million with dairy coming in at almost $500 million."

Beef production employs the most labor, about 30 percent of the industry total. Coming in second is the hog sector, directly employing more than 6,000 full-time equivalents.

In 2004, Illinois exported 12 percent of its output from all livestock sectors to other states. The poultry sector exported as much as 80 percent of its output.

"Much of the demands of the state are being met by livestock producers outside the state and outside the country," he noted. "While at first glance this seems to portent great opportunities for local producers, that conclusion would not be entirely correct.

"This is because the supply-demand matrix in the modern food industry is not dominated, as it once was, by proximity. Technology has advanced and the manufacture and distribution of food has changed."

Of the $257 million the state's livestock industry paid in taxes in 2004, $122 million, or 47 percent, was state and local taxes. The Clinton County livestock industry, for example, contributed over $376,000 in the form of indirect business taxes for state and local highways.

"This was 2.12 percent of the county's transportation revenue," Goldsmith said.

The 116-page report concludes by noting that the real impact of the livestock and meat and dairy processing sectors occur at the local level where livestock production or meat and dairy processing have been part of the historical fabric of the community and are significant contributors to the local economy.

"The potential growth of dried distiller grains, by-products of ethanol production, for use in livestock feed signifies real opportunities for Illinois dairy and beef producers," Goldsmith said. "Aggressive research programs are under way to help hog and poultry producers integrate more dried distillers grains into their feeding rations.

"Opportunities may exist for livestock operations to co-locate with ethanol plants, or in regions heavily populated by ethanol plants, to take advantage of low-cost feed supplies."

Meat and dairy processing, a $20 billion industry, serves as a critical economic engine in many local communities, he added.

"Globalization of the agriculture economy not only allows for expanded market opportunities for the state's meat and dairy industry, but it also means there is greater out-of-state and international competition," Goldsmith said. "As a result, Illinois's business environment is critical to maintain and expand the state's livestock and meat and dairy sectors.

"Understanding the comparative business environments would be helpful to identify gaps, opportunities for new policies, and ways to market the state."

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